The Energy Regulation and Markets Review - Stikeman Elliott

India
model public private partnership (PPP) structure for setting up transmission networks.
Electricity distribution is largely in the control of government distribution utilities,
but has also been privatised in certain regions (such as Delhi, Orissa, Mumbai and
Jamshedpur). The Electricity Act allows private entities to operate as parallel licensees,
though this arrangement is yet to be meaningfully brought into practice.
In India, the ownership of all mineral resources, including oil and gas vests with
the government, and is administered through the MoPNG. Gas Authority of India
Limited (‘GAIL’) and Oil and Natural Gas Company (‘ONGC’) are the largest owners
of oil and gas pipelines in the country. Private players are increasingly entering the CGD
space.
iv Transfers of control and assignments
While there are no restrictions on transfer of control or assignment of a generating
company, for generating stations set up pursuant to certain renewable energy policies
or by competitive bidding (for thermal or hydro-electric projects), however, there is a
shareholder lock-in period for the developer. For instance, in thermal or hydro-power
projects set up under competitive bidding there is a share-holding lock-in of 51 per
cent up to two years after the commissioning date of the power station, and 26 per
cent minimum shareholding requirement for three years thereafter for the original
shareholders of the generating entity that has signed the power puchase agreement
(‘PPA’). Lenders have also in some instances in the past required the sponsors to retain
shareholding in the project SPV during the term of the loan.
Holders of licences for oil and gas exploration cannot transfer rights, title or
interest under the licence without prior written permission from the government. A
party may assign or transfer, a part or all of its participating interest under the PSC,
with prior consent of the government. It must be noted that the change of control of a
party is also deemed to be an assignment under the PSC, requiring the consent of the
government.
Other than these sector specific restrictions, provisions of the Companies Act 1956,
Competition Act 2002, and the Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations 1997 (applicable to listed companies)
will apply with respect to change in shareholding through mergers and acquisitions.
Iv
TRANSMISSION/TRANSPORTATION and DISTRIBUTION
SERVICES
i Vertical integration and unbundling
Prior to the reforms in the electricity sector, state electricity boards (‘SEBs’) constituted
under the Electricity (Supply) Act 1948 were composite entities performing generation,
transmission and distribution function in a particular state. Under the Electricity
Act, SEBs were required to be unbundled into separate generation, distribution and
transmission companies. Several states had initiated unbundling activities much prior to
the enactment of the Electricity Act and most have now completed the process.
Exploration of oil and gas is a separately licensed activity. Transportation,
distribution and marketing activities in the oil and gas sector are yet to be unbundled.
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